Godrej Consumer misses third-quarter profit estimates on moderating urban demand

India’s Godrej Consumer Products reported a smaller-than-expected increase in third-quarter profit on Friday, hurt by the prolonged slowdown in urban demand.

The company, which makes the Cinthol brand of soaps among other products, reported a 14.2% rise in consolidated net profit of 4.98 billion rupees ($57.76 million) for the quarter ended Dec. 31.

Analysts, on average, expected a profit of 5.39 billion rupees, as per data compiled by LSEG.

Revenue from the sale of products rose 3% to 37.49 billion rupees, while raw material costs rose 2.3% due to a spike in key commodity prices such as palm oil.

The company had said in December that about two-thirds of its India business was under demand and margin stress due to a slowdown in urban consumption and higher costs of palm oil, a key raw material.

While rural demand has picked up in the last four quarters, it has been offset by a slowdown in urban consumption due to a delayed winter, sticky inflation, slow wage growth and not enough job opportunities, analysts have said.

Godrej has hiked prices moderately to offset higher commodity prices but that hurt sales volumes, which were flat compared to last year. The company had warned that price hikes could affect its consumer and wholesale businesses.

Larger peer Hindustan Unilever reported a marginal gain in quarterly revenue and profit on Wednesday, although it cautioned of near-term margin stress due to slow urban demand.